Protectionism remains a major impediment to economic growth and free trade, making the TPP a very big deal.
Testimony Before the United States International Trade Commission
ITIF Senior Analyst Stephen Ezell testified before the International Trade Commission this Wednesday for an ITC Investigation examining the effects of India’s trade, investment, and industrial policies on the U.S. economy. Ezell’s testimony argued that India has recently begun to embrace of a range of innovation mercantilist policies including forced localization policies such as local content requirements (LCRs), compulsory licensing of foreign intellectual property, price preferences and subsidies for domestic manufacturers, market access restrictions, and barriers to foreign direct investment. Collectively, these policies constitute a coherent Indian industrial policy which seeks to bolster Indian economic and employment growth by distorting global trade and forcing investment and production to occur in India. India has erected these policies across a diverse range of sectors from information and communications technology (ICT) and life sciences to renewable energy, manufacturing, retail, and financial services. But while these policies appear to offer India short-term benefits, in the long run they will prove self-defeating, damaging not just India’s economy—including its producers and consumers—but also harming enterprises and workers in India’s trading partner countries, including the United States, and even the global innovation economy.
What Is the Generalized System of Preferences, and Should Congress Renew It?
The Generalized System of Preferences has become a way for mercantilist nations to hide behind egregious trade practices, including forcing local production as a criterion for market access, subsidizing exports, stealing intellectual property and favoring domestic companies over foreign ones. As such Congress should not rubber stamp reauthorization; rather, they need to significantly reform the program.
Selling the President's Ambitious Trade Agenda
Rob Atkinson writes in The Huffington Post that to move a growth-based trade agenda forward, President Obama must strongly press Congress to pass Trade Promotion Authority legislation with bipartisan support. The President and the USTR also need to ensure that all future trade agreements, including the Trans-Pacific Partnership, include strong protections against foreign innovation mercantilist practices, including the failure to protect intellectual property.
America to Become # 2 Global Economy—And That’s Not Great News
Economists anticipate that China will surpass the United States as the world’s largest economy sometime in 2016 or 2017. Some, such as Charles Kenney writing recently in the Washington Post, argue that this does not constitute cause for concern, primarily since per-capita U.S. incomes will remain higher. But ceding a position that the United States has held since 1871 should not be taken lightly. In fact, the United States’ loss of the global economic pole position is quite concerning, first because it brings into stark relief the economic underperformance of the U.S. economy over the past decade and a half—the fundamental causes of which have yet to be ameliorated by enacting policies that would improve the competitiveness of the U.S. economy, its firms and industries. Second, the country poised to take the lead, China, has grown so rapidly in no small part by practicing economic mercantilism on an unprecedented scale, embracing a broad and deep range of mercantilist policies, everything from massive subsidies for state-owned enterprises, abuse of anti-trust policy, currency manipulation, and standards manipulation, to the theft of intellectual property and forced transfer of technology as a condition of market access. But such innovation mercantilist policies harm other nations and cause them to seek to enact similar policies in response, leading to degradation of a global economy characterized by liberalized, market-based trade that will ultimately reduce global consumer welfare. Thus, the United States should not relinquish its position as the world’s leading economy without competing fiercely for that title. It should start by implementing a comprehensive range of innovation, productivity, and competitiveness enhancing policies, as ITIF has long argued, and by continuing to push back aggressively when other nations use trade-distorting policies while pushing for stronger global trade rules that promote market-based economic competition.